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What is a "contributory defined benefit plan"


Guest Ronald

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Guest Ronald

In order to be a participant in the plan, an employee does not have to contribute to the Plan, UNLESS his/her job classification is covered by a collective bargaining agreement between the Plan Sponsor and one of the unions that represents some of the participants.

The reason I ask is that our client wants to offer an early retirement window benefit, but Treas. Reg. 1.401(a)(4)-3(B)(2)(iv) states "no employee contributions. The plan must not be a contributory DB plan." Does the fact that some of the participants "contribute" to the plan due to a collective bargaining agreement cause the plan to be a contributory defined benefit plan? I have tried to find a definition of contributory defined benefit plan, but have been unsuccessful.

I would appreciate anyone's guidence.

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The regulatory cite is part of the definition of a "safe harbor" plan design of a DB plan. Safe harbor is a concept created so that the plan is not required to prove, by some other means, that it is non-discriminatory. In other words, the safe harbor design requriements ARE the test of non-discriminiation.

See 1.401(a)(4)-3(f) for special rules, including subsection (4) for discussion on Early Ret. windows, and also in 1.401(a)(4)-4(d).

Contributory DB plans are discussed in reg. 1.401(a)(4)-6.

Another help help may be to search this website, or the Message Boards, for references to "Early Retirement Windows".

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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